Connecticut House passes new budget deal late Saturday night

Susan Haighassociated Press

Published
6:05 am EDT, Sunday, May 4, 2014

HARTFORD -- A $19 billion state budget crafted by Democrats has passed the Connecticut House of Representatives just days after revelations that the state's projected budget surplus has plunged by hundreds of millions of dollars.

The bill passed late Saturday night on a mostly party-line vote of 91-55, with three Democrats joining all the Republicans in opposition. The bill moved to the Senate, which planned to immediately take the bill up for a vote. Both chambers are controlled by Democrats.

Democrats praised the bill for being balanced and under the state's spending cap.

But the minority Republicans questioned its fiscal soundness, concerned the revised budget relies on the Department of Revenue Services collecting an extra $75 million in delinquent taxes.

The General Assembly's majority Democrats praised the agreement reached with fellow Democrat Gov. Dannel P. Malloy for being balanced, below the state's spending cap, and earmarking more money for municipalities and early childhood education slots. Rep. Toni Walker, D-New Haven, co-chairman of the legislature's budget-writing committee, said the plan "speaks to the priorities that we all embrace dearly."

But the minority Republicans questioned the proposal's financial soundness, given the state's declining revenues. They criticized the election-year budget for not addressing projected future deficits, estimated at $1.4 billion in fiscal year 2016, and assuming millions of dollars in savings to balance accounts.

"The budget that's before us now is a house built on a faulty foundation. And unless and until we change that foundation, that house will crumble," said House Minority Leader Lawrence Cafero Jr., R-Norwalk. "This is our opportunity to fix the foundation. The budget that's before us does not do that."

Republicans ramped up their criticism after learning in the afternoon the Democrats' budget counts on the state Department of Revenue Services tracking down $75 million more in unpaid back taxes. The last-minute addition of projected revenue came to light after the GOP asked about a line item identified as "miscellaneous tax" revenues in a budget document. It had jumped from $20.2 million to $95.2 million.

A DRS tax amnesty program last year collected $190 million in back taxes. It was originally projected to generate $35 million.

Williams called it "a little funny" that the $75 million was recently added to the budget after the state's projected surplus collapsed by $461.5 million to $43.4 million. It also came after Malloy announced the Democratic budget agreement would repeal the implementation of the gambling game keno, included last year in the two-year budget as a way to generate additional state revenue. Many lawmakers had since voiced regret about the original decision to allow the Connecticut Lottery Corporation to offer the game.

Benjamin Barnes, Malloy's budget secretary, said while last year's tax amnesty, which offered a reduction of penalties and interest for delinquent taxes, was successful, some people couldn't fully pay up because they didn't have the cash. He said DRS believes it can follow-up with some delinquents while tracking down others, especially with the use of new tools, such as data mining techniques used by the state to detect Medicaid fraud.

"We believe that this enhanced collection effort will be achieved without an amnesty and without a new set of incentives offered to delinquent taxpayers," Barnes said.

The sudden decline in the projected surplus prompted Malloy and the Democrats to make some last-minute changes. For example, the governor, who is seeking a second term in office, had to scrap his plan for a $55-per-person tax refund and an additional $100 million pension payment. The remaining $43.3 million will be deposited in the state's Rainy Day Fund.

Malloy's administration blames much of the surplus funds drop on personal income tax collections from wealthy people. It has said more taxpayers than expected claimed investment income in 2012, ahead of the Jan. 1, 2013, expiration of former President George W. Bush's tax cuts.

While Republicans contend the drop is a sign that Connecticut's economic remains fragile, Malloy contends the state is on the right track.

"I actually feel pretty good. There will be no tax increase in the future. We will not overspend," the governor said Friday. "We have a pretty consistent rate of spending."